Subject: WHOA! Greenspan tells Gulf States to drop dollar Tue Feb 26, 2008 5:23 am
Alan Greenspan, the former chairman of the US central bank, or Fed, has said that inflation rates in Gulf states, which are reaching near record levels, would fall "significantly" if oil producers dropped their US dollar pegs.
Speaking at an investment conference on Monday in Jedda, Saudi Arabia, he said the pegs restrict the region's ability to control inflation by forcing them to duplicate US monetary policy at a time when the Fed is cutting rates to ward off an economic downturn.
Debate is rife in the Gulf on how to tackle inflation.
Levels have hit seven per cent in Saudi Arabia, the highest in 27 years and a 19-year peak of 9.3 per cent in the United Arab Emirates in 2006.
Free float?
"In the short term free floating ... will not fully dissipate inflationary pressure, although it would significantly do so," Greenspan said.
Saudi and UAE central bank chiefs are in favour of retaining dollar pegs, but Sheikh Hamad bin Jassim bin Jabr al-Thani, the prime minister of Qatar, is pushing for regional currency reform to avert possible unilateral revaluations designed to curb inflation.
According to Hamad Saud al-Sayyari, governor of the Saudi central bank, floating the Saudi riyal would not be appropriate for an economy that relies on oil exports.
"Floating is beneficial when the economy and exports are diverse ... as for the kingdom it remains reliant on the export of a single commodity," he said.
Investor attraction
The dollar peg was also defended by Sultan Nasser al-Suweidi, the UAE central bank governor, at a conference in Abu Dhabi on Monday.
He said the policy was helping Gulf states attract foreign investments.
"They did very well for our economies because it has led to more capital flows," al-Suweidi said.
Qatar, has the region's highest inflation, and is considering the revaluing of the Qatari riyal to combat inflation currently at 13.74 per cent.
The exchange rate contributes to about 40 per cent of inflation in Qatar, where the riyal is believed to be 30 per cent undervalued.
Qatar's stand
"We prefer always to act with all the GCC countries," Sheikh Hamad said.
Qatar currently chairs the six-nation Gulf Cooperation Council.
"It's now time for the Gulf to have its own currency," he said.
Sheikh Hamad said such a currency should be "like the Japanese yen or other currencies".
Deutsche Bank said last month that both Qatar and the UAE will probably cut ties to the US dollar this year and track currency baskets as Kuwait did last May.
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Subject: Re: WHOA! Greenspan tells Gulf States to drop dollar Tue Feb 26, 2008 6:50 pm
Dollar Falls to Record Low of $1.50 Per Euro on Rate Outlook
The dollar fell below $1.50 per euro for the first time since the European currency was introduced in 1999 after U.S. home prices and consumer confidence tumbled, bolstering bets the Federal Reserve will cut interest rates.
The U.S. currency slumped against 15 of the 16 most-active counterparts after Fed Vice Chairman Donald Kohn said turmoil in credit markets and the possibility of slower economic growth pose a ``greater threat'' than inflation.
Kohn's comment ``confirmed the Fed will keep cutting interest rates,'' said Adam Boyton, a senior currency strategist in New York at Deutsche Bank AG, the world's biggest currency trader. ``That brought more downward pressure on the dollar.''
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Subject: Re: WHOA! Greenspan tells Gulf States to drop dollar Tue Feb 26, 2008 8:11 pm
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Subject: Re: WHOA! Greenspan tells Gulf States to drop dollar Tue Feb 26, 2008 8:17 pm
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Subject: Re: WHOA! Greenspan tells Gulf States to drop dollar
Subject: WHOA! Greenspan tells Gulf States to drop dollar 
Tue Feb 26, 2008 5:23 am
